Centrica signs deal for North Sea sites

Feb 23, 2012 12:00 AM

Scottish gas-owner Centrica has agreed to buy a big portfolio of oil and gas assets in the UK North Sea from Total for $ 388 mm and underlined its desire for similar deals.
The utility giant's upstream business is buying stakes in seven oil and gas fields in the Central North Sea and associated infrastructure in a deal that will result in a significant increase in the size of the unit.

The deal covers non-operated stakes in assets in three major areas off Scotland, which will increase Centrica's reserve base by 22 mm barrels oil equivalent, or 5 %. It will give Centrica access to more gas that it could use to meet the requirements of the division that supplies millions of consumers across the UK.
Centrica has been building up its North Sea business partly to reduce its reliance on wholesale markets.

Situated in Aberdeen, the unit is based around the Venture Production business which Centrica bought for £ 1.3 bn in 2009. Last month Centrica agreed to pay ConocoPhillips £ 140 mm for some gas assets in UK and Norwegian waters.
A Centrica spokesperson said: "We will still be looking for further investment opportunities moving forward as part of our plan to grow the business by 50% in the next three to five years." The deal provides further evidence that some firms want to increase their exposure to the UK North Sea despite the surprise tax hike in the budget in March last year.

Centrica said it will recover 20 % of the purchase price through UK tax allowances. Some might wonder if Total's decision to sell the assets concerned suggests its interest in the North Sea is waning.
The head of Total's North Sea business, Philippe Guys said it felt betrayed by the Government's decision to raise taxes. In 2010 Total agreed to invest £ 2.5 bn in the Laggan Tormore development West of Shetland.

However, a spokesman for Total said: "Total remains fully committed to the UK Continental Shelf.
"As well as continuing to bid for new licences and maintaining a £ 170 mm exploration programme, we are currently investing nearly £ 4 bn in new developments and facilities, more than any other operator. What we have agreed to sell are interests in smaller, mature fields that are no longer integral to our strategy and for which we have received a good offer."

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